Single-plant sourcing decisions with a multidimensional knapsack model

This paper addresses sourcing decisions and how those decisions can affect the management of a company’s assets. The study begins with a single-plant insourcing problem in which the facility chooses, from a list of parts, which parts to bring in-house. This model is extended to include an outsourcing element where, in addition to the decision of which parts to insource, parts currently in-house are considered for outsourcing. The selection is based on maximizing the value of the selected parts while remaining within the plant’s capacity. This is defined as the sourcing problem and modeled as a multidimensional knapsack problem (MKP). Characteristics of the sourcing problem are identified and compared to standard MKP test problems, then utilized to provide guidelines for generating industry-motivated data sets. Experiences with modeling and solving the sourcing problem for a sheet metal fabrication facility are reported.     

To outsource IT or not?: recent research on economics and evaluation practice

The paper reports findings from 26 longitudinal case studies of information technology (IT) outsourcing researched in the 1993–95 period. The primary focus is on evaluation practices in the lead up to making IT sourcing decisions. The pre-existing IT evaluation system was found to be a help or a major hindrance as a basis from which to assess outsourcing vendor bids. Difficulties experienced in evaluating in-house performance are highlighted. Issues include evaluating total IT contribution, identifying full costs, benchmarking and external comparisons, the role of charging systems, and the adoption of service level agreements by the in-house operation. Organizational experiences on assessing vendor bids against in-house options are then detailed. These are presented in distilled form as ‘a rich picture’ representative case study, together with additional lessons derived from the research. Finally we highlight the emerging evaluation approach shared by organizations that made effective sourcing decisions.     

Escaping ‘localisms’ in IT sourcing: tracing changes in institutional logics in an Italian firm

Organizations are limited in their choices by the institutional environment in which they operate. This is particularly true for IT sourcing decisions that go beyond cost considerations and are constrained by traditions, geographical location, and social networks. This article investigates how a company can disentangle itself from the constraints of the institutional environment. We do so drawing on a longitudinal case study of an Italian SME active in the steel industry that successfully changed its institutionally sound, but increasingly inefficient, IT sourcing practice. Our main result suggests that by attending steadily to institutional logics, organizations can become selective in how the institutional environment influences them and act more purposefully in their decisions. In particular, through the creation of companywide IT management competencies and targeted hiring practices, organizations can strike a balance between the different institutional logics guiding IT sourcing decisions and eventually shift from the dominant logic of localism to a logic of market efficiency. This change does not depend from a choice but rather builds on a process through which IT management competences are slowly integrated in the organization.     

Enabling assisted strategic negotiations in actual-world procurement scenarios

In the everyday business world, the sourcing process of multiple goods and services usually involves complex negotiations (via telephone, fax, etc.) that include discussion of product and service features. Nowadays, this is a high-cost process due to the scarce use of tools that streamline this negotiation process and assist purchasing managers’ decision-making. With the advent of Internet-based technologies, it has become feasible the idea of tools enabling low-cost, assisted, fluid, on-line dialogs between buyer enterprises and their providers wherever they are located. Consequently, several commercial systems to support on-line negotiations (e-sourcing tools) have been released. It is our view that there is still a need for these systems to incorporate effective decision support. This article presents the foundations of Quotes, a commercial sourcing application developed by iSOCO that, in addition to cover the whole sequence of sourcing tasks, incorporates decision support facilities based on Artificial Intelligence (AI) techniques that successfully address previous limitations within a single and coherent framework. The paper focuses on the computational realization of sourcing tasks along with the decision support facilities they require. While supported negotiation events are Request for Quotations/Proposals (RFQs/RFPs) and reverse auctions, decision support facilities include offer generation, offer comparison, and optimal bid set computation (winner determination) in combinatorial negotiations. Additionally, the paper presents a compound of experiences and lessons learned when using Quotes for real sourcing processes.     

Ein COCOMO-basierter Ansatz zur Entscheidungsunterstützung beim Offshoring von Software-entwicklungsprojekten

A COCOMO-based Approach to Decision Support in Offshoring Software Development Projects In this paper we examine the evaluation of software development projects when several offshore service providers are involved. Therefore it supports the process of setting up a sourcing portfolio. The introduced decision support model is based on the well-known effort estimation approach COCOMO which supports the transfer into practice remarkably. Based on the costs of a proprietary development, the model describes to what extent the related development effort is affected by the sourcing decision. Additionally it quantifies the expected savings by considering the risk involved in the sourcing decision. As a result it can be stated that solely focusing on labour cost differences will usually lead to false decisions. Finally a detailed case study shows the practicability of the decision support model and illustrates its results.     

Determinants of IS sourcing decisions: A comparative study of transaction cost theory versus the resource-based view

Many organizations have employed the concepts of ‘asset specificity’ and ‘uncertainty’ from transaction cost theory (TCT), and ‘strategic resources’ from the resource-based view (RBV) as drivers of their information systems (ISs) sourcing decisions. They, however, face a dilemma when TCT and the RBV suggest different sourcing alternatives. The study identifies contexts where sourcing decisions made based on these two theories differ, and examines which theory accounts better for an organization's sourcing decisions. Results show that a high-specificity asset is a major driver of sourcing decisions. It overpowers the effects of uncertainty on sourcing decisions; while a non-strategic resource has no impact on sourcing decisions. In particular, where the two theories make conflicting predictions, organizations should not always outsource non-strategic resources. Non-strategic resources that involve high specificity should be retained internally. The paper concludes with implications for academics and practitioners, and a discussion of future research directions.     

System sourcing and information processing capability in supply chains: a study of small suppliers

Although the adoption of inter-organizational systems (IOS) has been studied extensively in the existing literature, relatively little research attention has been paid to how small firms in supply chains are influenced by their larger partners in making their system sourcing decisions. In this study, we examine how small suppliers may choose their system sourcing approaches to better serve and collaborate with their large customers in supply chains. Our empirical findings suggest that information processing requirements and collaboration needs drive small suppliers to adopt more commercial off-the-shelf software package (i.e., external sourcing) to build their IOSs. Moreover, we find that small suppliers take such external sourcing as a way to achieve system effectiveness and enhance their information processing capabilities. The findings of this study generate important theoretical and managerial implications for IOS adoption and organizational information processing.     

Tool support for disseminating and improving development practices

Knowledge management in software engineering and software process improvement activities pose challenges as initiatives are deployed. Most existing approaches are either too expensive to deploy or do not take an organization’s specific needs into consideration. There is thus a need for scalable improvement approaches that leverage knowledge already residing in the organizations. This paper presents tool support for an Experience Factory approach for disseminating and improving practices used in an organization. Experiences from using practices in development projects are captured in postmortems and provide iteratively improved decision support for identifying what practices work well and what needs improvement. An initial evaluation of using the tool for organizational improvement has been performed utilizing both academia and industry. The results from the evaluation indicate that organizational characteristics influence how practices and experiences can be used. Experiences collected in postmortems are estimated to have little effect on improvements to practices used throughout the organization. However, in organizations where different practices are used in different parts of the organization, making practices available together with experiences from use, as well as having context information, can influence decisions on what practices to use in projects.     

Portable Composition: iTunes University and Networked Pedagogies

The development of mobile, convergent media networks is altering the context of professional, educational, and everyday communication. This essay examines the incorporation of iTunes University into writing and new media composition instruction, including institutional and technological contexts and faculty and student responses. This examination suggests the value of studying networked composition by following the expanding web of local interactions that link the conventional scene of composition—the student at the computer—with other events, such as college policy decisions, technology design choices, and the multitude of other compositional events behind the media available to students across the Internet. As these mobile networks become more powerful and pervasive, they will have a greater impact on compositional practices and will require a shift in habitual, disciplinary approaches to authorship and to the relationship between the more formal discourses of academics and the informal communications on mobile networks.     

Extending electronic sourcing theory: An exploratory study of electronic reverse auction outcomes

Existing electronic sourcing theory has predominantly focused on the impact of electronic reverse auctions on price savings and has proposed various factors influencing this outcome. Such price savings have been widely claimed to come at the expense of the buyer–supplier relationship. Only a few research studies, however, have investigated the impact of electronic reverse auctions on the buyer–supplier relationship. Based on an extensive literature review and multiple case study research, we extend electronic sourcing theory by developing a conceptual model that considers a broader set of outcomes, posits organizational and project antecedents that a buying firm can manipulate to impact those outcomes, and introduces supplier-related factors that moderate the antecedent–outcome relationships. In contrast to prior research, our model shows that buying organizations consider a broad set of financial, operational, as well as strategic e-sourcing outcomes, and that, under certain conditions, the traditional trade-off in electronic reverse auctions between price savings and the buyer–supplier relationship does not hold.     

The Network Maturity Model for Internet development

The Internet has attracted more than 50 million users during the past four years, and there is every indication that its growth will continue at a similar rapid pace. As use of both enterprise networks and the Internet continues to grow, addressing the need for quality is an increasingly important issue. The paper considers the Network Maturity Model, a process for defining and implementing business decisions about allocating development resources, engineering decisions about network layout and performance, and management decisions about network operations. NMM introduces sound business and engineering practices from the disciplines of systems engineering and project and quality management to the design and operation of complex networks     

Lessons in global information technology sourcing

Successful information technology sourcing decisions require customers to identify their IT needs, know the sourcing market, and develop significant contract-crafting and relationship management skills. The author gives twelve customer lessons considered to be most important for managing four processes: evaluating market options; assessing the IT portfolio; crafting deals; and managing relationships. Three lessons are given for suppliers.     

Quantifying suppliers’ product quality and delivery performance: A sourcing policy decision model

This paper provides buying firms with a useful sourcing policy decision tool to help them determine an optimum set of suppliers when a number of sourcing alternatives exist. We propose a probabilistic cost model in which suppliers’ quality performance is measured by inconformity of the end product measurements and delivery performance is estimated based on the suppliers’ expected delivery earliness and tardiness. The model is then empirically tested, utilizing the parameters obtained from one US mechanical component manufacturing company. The results from the case analysis indicate that single sourcing could be a cost effective policy but is not a panacea when the buying firm pursues product quality and delivery excellence. A prerequisite condition for the success of single sourcing practices is a low incoming quality variation within a group of single-source suppliers.     

Analysing four types of IT sourcing decisions in the context of scale, client/supplier interdependency and risk mitigation

The main thrust of the article is to distinguish between four types of IT sourcing decision: total outsourcing; multiple-supplier sourcing; joint venture/strategic alliance sourcing; and insourcing. To illustrate each type, detailed case histories are used that analyse the reasons why specific IT sourcing decisions were adopted. Here, we consider total outsourcing at the London Stock Exchange; multiple-supplier sourcing at ICI plc; joint venture project sourcing at CRESTCo Ltd; and insourcing at the Royal Bank of Scotland. The trend towards outsourcing is increasing in all industrial and commercial sectors. However, client organizations need to become more aware of some of the pitfalls, particularly in respect of large-scale outsourcing deals to single or multiple suppliers. This is because the move to IT outsourcing engenders the need to develop new capabilities and skills to manage complex commercial contracts. We therefore conclude that, while many IT outsourcing contracts followed rationalization, cost-cutting and disappointing results from in-house IT provision, short-termism and current uncertainties over market, business and political conditions pose problems for many organizations in deciding future outsourcing arrangements.     

The stability of cooperative sourcing coalitions ‐ game theoretical analysis and experiment

Cooperative sourcing is when multiple firms form a coalition to merge similar processes using shared-service processing in order to leverage economies of scale and skill. This paper discusses how coalition partners should allocate coalition costs and benefits to ensure a stable coalition which minimizes the incentives for current or future coalition partners to withdraw from the coalition. The paper develops a formal cost allocation and benefit model which is then used in game theoretical analyses and bargaining experiments. The results show that proportional cost allocation is key to avoiding unstable coalitions. However, if coalition partners do not disclose their cost structures to facilitate a cooperative decision in favor of proportional cost allocation, but rather negotiate shared costs based on “closed books”, proportional cost allocation is rarely achieved. In such cases, the Shapley value has high predictive power and negotiators are in danger of making poor decisions that can lead to instable coalitions. These findings help sensitize managers to the structural threats inherent to multilateral negotiations of cooperative sourcing coalitions.     

Decision making of sourcing and order allocation with price discounts

This paper applied a mixed integer programming approach to solve the sourcing and order allocation problem with multiple products and multiple suppliers in a supply chain. The decision process is driven by multiple objectives and a set of constraints. Two schemes of quantity discounts are used to compare the influence upon the buying decisions. An example and an experimental test are presented to demonstrate the effectiveness of the model. The computational solutions are a valuable tool to eliminate much of the subjectivity that impacts decisions under complex situations. A graphical display for the solutions is provided which can assist DMs in making decisions among criteria.     

Key Issues for Global it Sourcing: Country and Individual Factors

Globalization trends, trade liberalization in developing countries, quantum improvements in worldwide telecommunications infrastructures, and cost-cutting pressures have together compelled many companies to examine global opportunities for sourcing some of their IT operations. Such global sourcing, whether it involves insourcing or outsourcing, requires IT project managers to deal with issues unique to operating in heterogeneous international environments. This article examines the influences of country-level and individual-level factors on the effective management of offshore IT sourcing relationships and offers a set of best practices that project managers should consider when entering into such global arrangements.     

Sourcing in or out: Implications for social capital and knowledge sharing

The sharing of knowledge between a firm and its internal or external service suppliers has become an important element of contemporary sourcing arrangements. Moreover, the knowledge based view (KBV) has long suggested that due to stronger cognitive links within firms, internal compared to external service provision creates better conditions for knowledge sharing. Empirical evidence for this claim is however scarce, and the KBV does not explain the mechanisms for more knowledge sharing in internal sourcing in detail. Moreover, there is now some evidence to suggest that firms’ relationships with external sourcing partners are becoming more similar to those with captive centres, which represent a less traditional form of insourcing setting. To scrutinize the possible knowledge sharing advantages of internal sourcing in more depth, we turn to social capital (SC) research. There are some theoretical claims that SC and knowledge sharing are stronger within than between firms, and there is ample evidence that SC facilitates knowledge sharing. Our survey results suggest that the extent of knowledge sharing and SC are indeed stronger in a captive than in an external sourcing mode, and that structural (tie strength), cognitive (shared understanding), and relational (trust) aspects of SC mediate the effect of sourcing mode on the extent of knowledge sharing. By contrast, network stability (a structural aspect) mediated knowledge sharing only indirectly, by reinforcing the other SC aspects. We highlight important contributions to research and practice of IS outsourcing and social capital.     

How to orchestrate R&D networks? The role of orchestration subprocesses and collaborative practices over time

Although R&D networks have been increasingly used by companies to foster innovation through collaboration, there are still challenges regarding how to successfully orchestrate such projects. The goal of this study is to analyse how a hub firm orchestrates an R&D network through collaborative practices. We based our study on the three orchestration subprocesses proposed by Dhanaraj and Parkhe, namely, to foster knowledge mobility, guarantee innovation appropriability, and maintain network stability. To achieve our goal, we analysed the collaborative practices in an R&D network in the semiconductor industry in France. The case consists of an R&D network among 26 companies to create a new transistor. The data include 65 interviews and 192 documents. The study contributes to the literature on network orchestration by showing that specific collaborative practices performed by a hub firm enable a fourth orchestration subprocess—network reconfiguration—which is necessary in long‐lasting and complex R&D networks and also affects the other three subprocesses. Network reconfiguration consists in disassociating and attracting new members to the R&D network to cover knowledge demands, and is performed by the hub‐firm through specific collaborative practices. The results can benefit practitioners by showing which collaborative practices may be useful for a hub firm throughout the development of an R&D network.